The Serbian Socialists' dilemma

Ongoing negotiations on the formation of a new ruling coalition following 11 May early elections have placed Serbia at a fork in the road, with two completely divergent political and economic aspirations.

The country is now split between hardliners led by the Radical Party (SRS) and liberals led by the Democratic Party (DS) - and both sides require more seats in parliament seats in order to meet the 126-seat minimum necessary to form the government.

The future of Serbia - which many are describing in very black and white terms as a choice between prosperity or isolation - depends, perhaps rather ironically, on the reformed Socialist Party of Serbia (SPS), the party once led by late Serbian president Slobodan Milosevic. In May elections, the Socialists won 20 seats in parliament - a number that could make or break either the Radicals or the Democrats, led by Serbian President Boris Tadic.

Should the Socialists choose to join forces with the Democrats, the overwhelming winner of the 11 May elections with 38.75 percent of the vote, the Democrats would have a majority and, if their stated goals are any judge of the what is to come, Serbia would enjoy a economic boost, supported by the EU.

In order to encourage Serbian voters to support the Democratic option, prior to elections the EU signed the Stabilization and Association Agreement (SAA) with Serbia - the first step toward EU accession for western Balkan nations. The bloc also saw to it that Italian car maker Fiat signed a key agreement for the return of the Fiat to the ailing Zastava car factory in Serbia with a €700 million investment, which would mean plenty of new jobs. And one week before the elections, 15 EU countries announced the cancellation of visa charges for certain groups of Serbian citizens.

This dangling of European carrots seemed to work: Serbian voters showed out in force for the DS and President Tadic.

But, the truth is that despite their strong support, a DS-led coalition government would always face a very formidable opposition - the Radicals and the Democratic Party of Serbia (DSS), led by Prime Minister Vojislav Kostunica. Kostunica, for his part, has set his sites almost solely on distancing Serbia from the EU because of that nasty business of Kosovo's independence.

Furthermore, the DS' majority strength would come in part from the Socialists and their anti-western sentiments in some cases - such as cooperation with the war crimes tribunal in The Hague and the rehabilitation of Milosevic, his family and former associates - so in some respects, the coalition will have a healthy internal opposition of its own.

On the flip side, a government formed by the Radicals, the DSS and the Socialists would represent the most stabile and coherent government in Serbia since the fall of Milosevic eight years ago. All three parties see eye to eye on certain issues, such as war crimes and Kosovo, so internecine bickering of the kind that can bring down a government is less likely.

In short, the Socialists could end up being the radical part of a DS-led government or the moderate wing of a Radical/DSS-led government.

Discouragingly for Tadic's DS, the Socialists approved over the weekend a draft coalition agreement with his rivals at the city level, promoting Radical Aleksandar Vucic as the next mayor of the capital, Belgrade.

However, the Socialists are having some internal problems of their own on the national level, and it remains unclear which side they will choose in the end.

Progress vs popularity

The Socialists were nearly vanquished after the fall of Milosevic in 2000 and his deportation to The Hague the following year. Almost all high-ranking Socialist party members - including prime ministers, presidents and diplomats - were arrested and tried over various crimes after the fall of Milosevic, including corruption and war crimes. Since then, most of the party's electoral representation has sided with the stronger Radicals.

After the announcement of the initial election results, SPS leader Ivica Ducic, party spokesperson during the Milosevic era, traveled to Russia and met with several officials there, including the center-left opposition party Fair Russia.

SPS officials rejected media speculation that Ducic was meeting with Russian officials for advice on which side to join in the coalition battle or to visit with members of the Milosevic family.

However, in separate statements printed in the Serbian media, Russian officials stressed that they would like to see Serbia in good relation with EU countries, which would mean siding with Tadic's DS. After all, it is not in Russia's interest to have to prop up an otherwise isolated Serbia, especially now that Russia itself controls the country's energy sector.

Unlike the DSS and the Radicals, Socialist Party leaders have also indicated that they would prefer to lead Serbia toward the EU. For now, though, speculation is that the SPS is closer to making a coalition with the DSS and the Radicals, based on their common ideologies.

Paradoxically, during a recent Socialist party leadership session, 10 out of 12 presidency members voted for a coalition with Tadic's DS, stressing that they did not wish to see the country regress to the situation in the early 1990s, but would rather see it move towards Europe.

This line of thinking, at least publicly, could give them problems with their electorate, which is comprised largely of the elderly who tend to be more anti-western and view the Democrats as lackeys of the West. Thus, despite their professed desire to move toward Europe, it appears that the party is, at least for now, reluctant to risk losing more of its voters to the cause. And for this first time since the fall of Milosevic, the Socialists are again an important force, and surely maintaining this momentum is high on their list of priorities.

At the same time, its coalition partners are growing anxious and pressuring the Socialists to choose progress over popularity. United Serbia leader Dragan Markovic has threatened to leave the sub-coalition with the Socialist if unless the party moves to side with Tadic's DS. The Pensioners party is also crying that the EU is Serbia's only option.

Assessing the long term

Western powers are sounding the alarm bells, warning that Serbia will face economic isolation if the government is formed by nationalist parties.

But in short term, at least, there will be no major changes if the nationalists take over, since Serbia still has support from international finance agencies, which would continue to channel aid over the next year or two.

One of the possible scenarios is that a nationalist government – led by the Radicals and the DSS - in order to satisfy its voters, could use the country's €10 billion reserves to build up infrastructure and raise pensions and other benefits for which the previous government failed to find the resources.

Still, the anti-western sentiment of such a government would render foreign investment riskier and after a year or two, western financial aid would likely decrease.

The Radicals and the DSS have already indicated what their first moves would be during their first two years of rule: They would annul the SAA agreement with the EU; freeze Serbia's EU membership bid until the majority of EU countries revoked recognition of Kosovo; and further distance the country from the EU, while seeking increased Russian support for the return of Kosovo.

There would be some opposition within the government, namely from the Socialists, but being the weaker party, they would be overrun by Radicals and DSS.